Business Valuations

There is no magic formula for valuing a business. However, by obtaining the relevant financial advice you may receive an indication of how much the business is worth. A buyer would usually consider the following methods and factors when looking to establish the value of a business:

  1. RoI – Return on Investment
  2. Net Asset Valuation
  3. Discounted Cash Flow and Modelling Techniques
  4. Price/Earnings Ratio
  5. Industry Rule of Thumb
  6. Entry Cost
  7. Strengths, Weaknesses, Opportunities and Threats
  8. Political, Economical, Social, Technological Influences/FactorsÂ

When valuing the business you will usually want to carry out at least two different valuation methods. Other factors that need to be considered include:

  • Past results
  • Potential growth
  • Major events
  • Lack of alternative targets
  • Pension costs
  • Any redundancy payments
  • Cash reserves
  • Relocation costs
  • Rebranding
  • Structure of the deal

There are many other factors that need to be considered but ultimately the value of the business is usually what the buyer is willing to pay for it.

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